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The Dynamics Influencing Progress Towards Responsible Investment: A Process Study of the Agency of the Code for Responsible Investment in South Africa (CRISA)

Feront, Cecile (2016-03)

Thesis (MPA)--Stellenbosch University, 2016.

Thesis

ENGLISH SUMMARY: Changes in investment strategies and capital flows are needed in order to support a transition to a
sustainable economy. However, despite the rise in popularity of the concept of responsible investment,
which recognises the need to take into account environmental, social and governance issues into
investment decisions, the pace of change within the investment industry appears slow and disconnected
from sustainability challenges. In South Africa, notwithstanding a leading voluntary and regulatory
framework in line with international recommendations, progress towards responsible investment appears
slow and uneven.
Given the importance of time in sustainability issues, the research investigates responsible investment and
the agency of supporting institutional strategies in the context of a process study. The objective of the
research is to gain an understanding of the dynamics at play within the investment industry and to assess
the agency of the Code for Responsible Investment in South Africa (CRISA) to promote progress towards
responsible investment in South Africa.
Using grounded theory methodology and drawing on the discipline of Systems Dynamics, the study
develops a conceptual process framework to explore the underlying processes influencing progress
towards responsible investment and evaluate the extent to which these are affected by institutional
strategies. The conceptual process framework shows how responsible investment, in its current
implementation, is unable to shift investment practices in time to support a sustainable economy. The
dynamics of change are too slow relative to the time horizon to generate a meaningful transformation.
Drawing attention to the role of learning processes and mental models, the conceptual process framework
challenges the theories, assumptions and practices underlying the intentions of the investment industry
and calls for new institutional strategies to encourage an ideological framework consistent with the
operating principles of a sustainable economy.
In light of the conceptual framework, the study evaluates the agency of the Code for Responsible
Investment in South Africa (CRISA) and its supporting regulatory framework to drive transformational
change within the South African investment industry. The empirical study is constructed as a multi-method research using quantitative and qualitative methods as well as expert reviews to analyse progress over
three years. The findings indicate that the Code for Responsible Investment in South Africa (CRISA)’s agency
to modify the investment practices of institutional investors and their service providers in South Africa is
limited, slow and difficult to substantiate. While some disclosure trends appeared encouraging, these mask
major issues with regards the quality, consistency, comparability and reliability of data available. Except for
a few leaders, the industry is characterised by an instrumental and discretionary approach to responsible
investment, which yields little effective change in terms behaviour and practices.
Finally, confronting theoretical propositions with empirical findings, the research challenges the strategies
used so far to promote responsible investment. The research advances that unless the regulatory
environment offers conceptual clarity and takes a firm and consistent stance in support of the sustainability
imperative, the Code for Responsible Investment in South Africa (CRISA)’s agency within the dynamics of
change in South Africa is likely to remain limited, inconsistent and temporarily disconnected from the
problems it tries to address.

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